VAT can be reclaimed on motor vehicles that are used, and made available for use, solely for business purposes – but that can be extremely difficult to prove. In one case, however, a computer specialist was granted a £20,805 VAT rebate after convincing the First-tier Tribunal (FTT) that he needed three luxury cars to impress his clients.

The man charged his customers up to £5,000 a day for his services and felt that it was important for his business that he drove cars that signified his success. He kept the vehicles’ ignition keys in a locked safe, to which he alone had the code. His children, who worked for him as contractors, also drove the cars but had signed agreements requiring that they only do so for business purposes.

In refusing to reimburse him for VAT paid on the purchase of the cars, HM Revenue and Customs (HMRC) pointed out that they were normally parked outside his home and that there was no physical barrier to their private use. They were thus made available for such use and the agreements with his children did not, in practice, prevent them from driving them for non-business purposes.

In upholding the man’s appeal, however, the FTT found him an honest and credible witness. He and his family had other vehicles for their private use and he had provided evidence that the mileage of the cars almost exactly coincided with the distances he and his children drove on business. HMRC had presented no evidence that the cars were used other than on business and securing their keys in the safe amounted to a physical impediment to their private use.